Private Treaty Vs Auction
Picking a selling strategy for your home
Once you’ve decided to sell your home, you need to determine which method of sale you are going to take. There are three main options: private treaty, auction and taking expressions of interest.
Each approach has different processes and can work to your advantage depending on the state of the property market at the time you list your home.
It’s important to understand what each strategy involves as it will play a major role in the way your real estate agent markets your home and the overall result once the house is sold.
The first place to start is by talking to your agent. They will have an in-depth understanding of the property market and where they feel your house fits into that picture. Based on this, they’ll recommend a strategy they feel will suit you.
“The method used for the sale of your home is one of the most powerful determining factors for your outcome,” explains Natasha McElwaine, director of McElwaine Estate Agents.
“A lot of thought, strategy, planning and marketing goes into launching a property. Delivering a succinct and successful strategy will mean the difference between your house selling and securing a price well above what you expected.”
Let’s take a look at each method.
This is the most common way that residential properties are sold in Australia. In this approach, owners set the price, based on guidance from valuers and estate agents and what is considered fair market value, and then prospective buyers make offers based on this price. The sale is usually negotiated with the assistance of the real estate agent.
It is a less intimidating method and is suitable for those who aren’t necessarily after a fast turnaround.
“A private treaty is great for buyers who are purchasing subject to finance and vendors who do not require a quick sale or who are selling in a market that is less buoyant,” Natasha said.
Once a price is agreed upon by the vendor and buyer, contracts are exchanged and a deposit is paid. After a cooling-off period where legal, building and financial checks are conducted, a settlement is reached and the final monies, and keys, change hands.
An auction is a competition in which buyers makes bids on what they perceive the value of your home to be. A reserve price, or minimum for which you would be happy to sell, is set and a date of auction is determined.
On the day, registered bidders can make offers, and the property goes to the highest named price, if it is above the reserve.
The main difference between this and a private treaty is that no price is revealed beforehand - bidders are giving estimates into what they think the property is worth. Also, there is no cooling off period for the highest bidder. When the auction is over, they must commit to the sale.
There is a sense of urgency in an auction and it reduces the amount of time your property will spend on the market, if the price is right.
“If market conditions are in your favour and there is a high rate of buyer interest and competitive bidding on the day, than you may achieve a generous sale price beyond your expectations,” Natasha said.
If the property market is subdued, you must be mindful that the reserve price is higher than what is considered reasonable.
Expressions of Interest (EOI)
This approach allows the vendor to set the timeline, terms and price of the sale.
“An EOI campaign withholds the price guide for a property to increase the number of enquiries, inspections and opportunities over the campaign and to obtain the best price,” Natasha explains.
It encourages potential buyers to put forward their best price, in order to stay competitive.